Small business owners are driving a continuing increase in theadoption of cash balance retirement plans, and those plans areleaving growth of new 401(k)s in the dirt.

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According to the 2017 cash balance research report from Kravitz,Inc., the number of new cash balance plans increased in 2015, themost recent year for which complete IRS Form 5500 is available, by17 percent, while 401(k)s only grew by 3 percent. The industry onlyexpected an estimated growth rate of 12 percent to 15 percent inthe sector.

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In addition, total assets in cash balance plans expanded to $1.1trillion, as they've logged double-digit growth every year since2001. In fact, over the past 15 years, cash balance plans — drivenby small business owners — have increased from 2.9 percent to 34percent of all defined benefit plans. Between 2010 and 2015alone, the nationwide growth rate of new plans hit 152 percent.

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A whopping 92 percent of cash balance plans are in place atcompanies with fewer than 100 employees, as smaller and mid-sizedcompanies look for ways to decrease risk and cost volatility. Theplans not only offer higher contribution limits seen in traditionaldefined benefit plans, but also greater flexibility, more like thatseen in a 401(k). They also provide tax advantages.

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Changes made in the 2010 and 2014 cash balance regulations,including the “Actual Rate of Return” option, as well as newinvestment choices, have made the plans more flexible foremployers, as well as removing some funding issues. Large plans aremoving to “Actual Rate of Return” as well, with the number of largeplans using it rising by nearly 20 percent.

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Medical/dental groups and law firms still make up about 40percent of the market, although cash balance plans are alsobecoming increasingly popular in other sectors, from technology toretail and manufacturing.

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And while the switch to a cash balance plan isn't good news forall employees, the report cites one statistic that should pleasethem: Employers typically double their contribution to employeeretirement savings when they move to a cash balance plan.

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